Understanding whether you are legally an employee or an independent contractor is more than a matter of job title. The distinction affects your rights to wages, benefits and legal protections. It also influences how you are taxed and what responsibilities your employer has toward you.
Some companies label workers as independent contractors to avoid certain obligations. Misclassifying someone who should be treated as an employee can lead to unpaid wages, lack of benefits and reduced access to legal protections under employment law.
What are the differences between employees and independent contractors?
Your job status is determined by how your work is structured, not by the label your employer uses. Several factors help distinguish one role from the other.
- Control over work: Employees often follow set schedules and use company-provided tools. Independent contractors usually control how and when the work is done.
- Level of independence: Independent contractors run their own business and may serve multiple clients. Employees typically work for a single employer and rely on that job for income.
- Permanency of the relationship: An employee relationship tends to be ongoing. Independent contractors are generally hired for a specific project or period.
- Financial investment: Independent contractors invest in their own equipment and take on financial risk. Employees do not usually invest their own money to perform their job.
- Payment structure: Employees are often paid hourly or receive a salary. Contractors are usually paid per project or through invoicing.
- Eligibility for benefits: Employees may receive benefits such as paid leave, health insurance and unemployment coverage. Independent contractors are not entitled to these benefits.
Recognizing job misclassification is important, especially when it affects your earnings, taxes or legal protections. If you suspect your role has been wrongly labeled, seeking legal guidance can help clarify your classification and protect your rights under employment law. You may be entitled to recover unpaid wages, overtime pay or other benefits depending on the outcome.